Nirmala's Short And Sweet Budget May Be Modi Government's Best One Yet

In many ways, this could well be Nirmala Sitharaman’s best Budget, and the one that is most likely to deliver in spades. If the last two Budgets were overshadowed by Covid, with the ongoing fiscal being impacted by two waves of Covid, Delta and Omicron, the massive success of the vaccination programmes indicates that the worst may be behind us by March. The economy could be fully open and firing on more cylinders by the start of the next fiscal year from 1 April.

The good part of the Budget is that the Finance Minister avoided making it an election pitch. She kept her speech short and sweet, using just over 9,000 words in one-and-a-half hours. There may have been no tax reliefs, but the speech did not tax any listener’s patience. “Boring” and focused is how one can best described it.

The key watchword for this Budget is growth, driven by capex, digital expansion, Make in India (Atmanirbhar Bharat), and credible and conservative financial projections.

Capex: The big leap this year is in capex, where there is a massive 35 percent rise from Rs 5.54 lakh crore this year (2021-22) to Rs 7.5 lakh crore in 2022-23. Taking the support given to states through grants-in-aid for their own capital spending, the final figure is said to be Rs 10.7 lakh crore. If the actual performance is anywhere near this figure, it will boost jobs and incomes all around. The extension of loan guarantees for micro, small and medium enterprises (MSMEs) and the streamlining of government procurement schemes, including ensuring speedy payments, will also help revive jobs in the informal sector.

Digital scale-up: The Reserve Bank will launch a digital rupee product using Blockchain technology, and digital banking is being taken to the hinterland, with 75 districts getting digital banking units. All villages, even remote ones, will be connected by fibre optic cable by 2025. And financial support for subsidising digital payments will continue in 2022-23. The 5G auctions will happen next year, and services will roll out during the year too.

Make in India: The production-linked incentive (PLI) scheme is being extended to 5G related design and manufacturing, and an additional allocation of Rs 19,500 crore is being made for achieving 280 Gw of installed solar capacity by 2030. The indigenous part of the defence sector’s capital procurement is to be raised from 58 percent to 68 percent in 2022-23. Some customs duties have been rejigged to protect small manufacturers of products like umbrellas. Atmanirbharta remains a key goal of this Budget too.

Credible numbers: Starting last year, the Finance Minister has cleaned up her Budget act by bringing off-balance-sheet borrowings and expenses back into the regular numbers. The numbers are also more realistic.

The fiscal deficit projected for 2021-22 is 6.9 percent (against the 6.8 percent indicated in the Budget speech last year) and will come down further to 6.4 percent in 2022-23. Sitharaman avoided the temptation to make the fiscal correction even sharper despite buoyancy in tax revenues.

Next year’s Budget is additionally credible because the expected receipts from disinvestment are pegged at a modest Rs 65,000 crore, down from 2021-22’s scaled down target of Rs 78,000 crore. This could mean that the share sales in Life Insurance Corporation and Bharat Petroleum - an IPO in the former case and a strategic sale in the case of the latter - may not come through in the ongoing fiscal. It implies that next year’s targets may also be overly conservative. Any uptick in revenues will enable the government to give growth and capex another leg up.

In short, the Budget is as “boring” as it should be by focusing on basics. And that is its greatest strength.